00:00I do want to talk about what this all represents, because you think about where we were a year ago.
00:05It was still very much the era of we were talking about whether we were going to see companies stay
00:09private forever,
00:10that there wasn't ever really a need to go public because you could get all the funding you need and
00:15beyond in the private markets.
00:17You fast forward to where we are right now. SpaceX already out in the open, anthropic open AI rumored to
00:23go next.
00:24It feels like public markets are cool again.
00:26They absolutely are. And I've been saying for the last year, public markets are not dead.
00:31And there is a tremendous amount of enthusiasm around new technologies, space, AI.
00:37And I think it's great. I think it's great for the markets.
00:40And finally, to see capital stock and equity markets actually grow, I think is a good indication.
00:45And I think the AI trade is likely to power the U.S. markets for some time.
00:51But I also think it's an important time to also think about concentration and the risks of being concentrated.
00:56And you look at the S&P 500, the top 10 names represent 40 percent of the total in the
01:03total market.
01:03The U.S. stock market now represents over 60 percent of the global markets.
01:07It's also a great opportunity for investors to reevaluate, reallocate their portfolios and think about other opportunities as well,
01:14because it's likely that given what's happened in markets over the last couple of years that maybe you're overexposed to
01:20technology and overexposed to U.S. markets.
01:23Well, it's funny you bring up the S&P 500, because imagine how much more concentrated it would be if
01:28they actually had sort of bent the rules to fast track SpaceX.
01:32But I digress.
01:32I do want to get your thoughts on something we were just talking about with Steve Sosnick from Interactive Brokers,
01:37the idea that in addition to IPOs, you're also seeing big equity raises from companies.
01:43You think about what we've seen already from Alphabet, Meta rumored also to maybe come to the market with their
01:48own capital raise.
01:50And then you think about what's going on in the debt markets with a lot of these big tech companies
01:54raising a lot of debt to also fund what's going on with the AI trade.
01:59What is what does that mean to you when you think about the supply demands, not just in equities, but
02:04also in debt?
02:06It feels like there's a little bit of a rebalancing going on.
02:09Yeah, absolutely.
02:09I mean, I actually think there's a big opportunity in fixed income for for investors.
02:14Yields have really reset to historically tractive levels for 4.44 for the five of the 10 year U.S.
02:25Treasury.
02:26And you look at active management, the ability to add value on on top of that.
02:31The egg is now yielding about four and four and a half percent core plus strategies that we manage are
02:39yielding about five and a half percent.
02:41Or we have very aggressive strategies that are yielding about six percent with half the duration of the market.
02:47And I think fixed income yields now have enough yield to insulate yourself from potential upticks in in in inflation.
02:56And you think about the S&P 500 yielding a little over one percent.
03:01The opportunity to invest in clip coupons going forward, I think, is a great opportunity for for for investors.
03:10One of the things we're recommending is a is a rebalancing of portfolios towards towards fixed income.
03:15Well, that's what I'm curious about, George, too, is just kind of what the allocation starts to look like.
03:19And not just in the broader sense of stocks versus bonds, but also just kind of folding in alternative assets,
03:24folding in private assets as well.
03:27Does that allocation meaningfully change relative to maybe where we were a couple of years ago?
03:32Oh, yeah. Yes, absolutely.
03:34Absolutely. The opportunity set to diversify portfolios within private equity, private credit.
03:40And I think in an environment where inflation might be ticking up, great opportunity with real assets, infrastructure.
03:48And I think it's an important opportunity for investors.
03:52And one work we're quite focused on in terms of bringing institutional quality alternative capabilities to individual investors in the
03:59wealth management.
04:00Is it wrong to sort of separate? I mean, I know private markets and public markets are technically different things,
04:05but we've kind of seen them rub shoulders a lot more closely, certainly in the way that that a lot
04:10of investors are looking to invest.
04:11Has that become sort of a big part of what you do now is sort of finding a way to
04:17sort of navigate, I guess, those two roads?
04:19Many of our competitors have sought to provide access through partnerships with third-party firms to get access for their
04:28clients into private markets.
04:30Under one roof within J.P. Morgan Asset Management, we have world-class public market capabilities and private market capabilities.
04:37One of the great opportunities we see is one of the great opportunities we see is for investors to integrate
04:41that decision-making, both in terms of investment research, portfolio construction, relative value decisions in private credit.
04:50Are you better off in software or being in public debt or in private debt?
04:55And so what we have done is built our private credit capability within our public market fixed income team, within
05:01our leveraged finance high yield team, leveraging very deep credit research, workout capabilities, and added private research.
05:10We're doing the same thing in public markets, public equities as well.
05:15And it's important not just for to add value in the private side of our business, but most of our
05:22public market research teams, equity teams, want to understand what's happening in private markets because that has a big impact
05:30on valuations and opportunities in public markets as well.
05:34Well, when it comes to private markets, particularly private credit, our colleagues at Bloomberg News reported in late April that
05:41you were basically readying this fresh private credit push that apparently J.P. Morgan was already talking with institutional investors
05:49to raise several billion dollars to get started, had already secured some commitments.
05:53Here we are about two months later.
05:55I mean, how are those talks going?
05:57How are those preparations been progressing?
05:59Because of what we see happening and the disruption relative to the wealth management funds that have invested in private
06:08credit and the liquidity issues and investors trying to raise liquidity in this market, I think that creates great opportunity
06:15for institutional investors.
06:17So the conversations we're having with big asset owners around the world, they're really looking at opportunities to reassess their
06:26private credit positions and the offerings that we're talking about, integrating both our ability in public markets and private markets,
06:34and to do that in a combined portfolio strategy.
06:37We're seeing a lot of optimism from clients around that.
06:40That's really interesting, and that's something I was wondering about as we were coming out of the SaaSpocalypse and then
06:46what we saw with all the withdrawal requests was whether or not we were going to see sort of the
06:50profile of the investor who's interested in private credit change.
06:53Because certainly opening up access points for retail and going down the wealth spectrum, that has very much been in
07:01vogue over the past year or two.
07:04But, you know, in the wake of all of this volatility, I mean, do you think that that interest is
07:08going to come more from institutions from here versus retail?
07:12Well, I think we'll continue to see interest in both areas, but certainly institutional investors, because of the long duration
07:22of their liabilities, have the patience in order to assess and allocate into markets where you see stress or at
07:31least liquidity, liquidity opportunities.
07:33So I think we're going to continue to see interest in both sides of the markets, but clearly institutions are
07:39going to use this as an opportunity, given some of the disruption that we've seen.
07:44How much geographic diversification are you seeing, meaning, you know, people investing outside of the U.S.?
07:49Well, think about it. We're into the second year where international markets are outperforming U.S. markets.
07:57It's not just a valuation. It's also an earnings opportunity.
08:00If you look at diversifying your A.I. trade, a great opportunity in emerging markets, emerging markets up over 20
08:08percent so far this year.
08:10And if you look at the top flow Morningstar categories, international is a big part of that.
08:17So investors are moving and reallocating internationally and into emerging markets.
08:22We think it's a great opportunity for investors.
08:25I do want to talk about opportunities you might be seeing at a firm level.
08:29And this is an M&A question because your big boss, Jamie Dimon, certainly turned heads earlier this month, saying
08:36that the bank is, quote, on the lookout for its next big deal
08:40and has between 10 billion to 20 billion dollars to work, which is a lot.
08:45And it's out there in the ether.
08:48City Wire dropped a report that Dimensional is potentially looking at a sale.
08:54J.P. Morgan was name dropped in there as well.
08:56Bloomberg Intelligence out with an analysis that it would certainly make a lot of sense when you think about how
09:01both of your firms approach active management.
09:04And I wonder whether that's something you're looking at.
09:07I've spent my entire career, as most of my colleagues have, building businesses organically from scratch, whether it be our
09:14global liquidity business,
09:16where we started with a billion dollars and now we manage well over a trillion.
09:20We were really a marginal player in U.S. mutual funds and decided to build that, took that global.
09:25Now we're one of the, I think, best active mutual fund managers.
09:30Ten years ago, we launched our first ETF.
09:33Today, we have 170 ETFs, over $380 billion.
09:37And I would argue one of the premier providers in terms of active ETFs globally.
09:44Our focus is on building our businesses organically.
09:47I have a huge amount of respect for David Booth and what Dimensional has built.
09:52But our focus is on building our business organically.
09:55And just to tie a bow on that, it sounds like that extends outside of just the dimensional conversation that
10:00you're not necessarily looking for in organic opportunities here.
10:05Our focus is on building our business organically.
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